Commission on Education Finance, Equity, and Excellence

Minutes

August 23, 2001

The Commission on Education Finance, Equity, and Excellence held its third meeting of the 2001 interim on Thursday, August 23, 2001, at 1:00 p.m. in Room 130 of the Lowe House Office Building, Annapolis, Maryland. The following members were present:

Dr. Alvin Thornton, Chair
Mr. Joseph F. Anderson, III
Delegate Paul Carlson
Senator Michael J. Collins
Delegate Norman H. Conway
Secretary T. Eloise Foster
Ms. Beatrice B. Gordon
Dr. Nancy S. Grasmick
Senator Barbara A. Hoffman
Delegate Carolyn J. B. Howard
Dr. Donald Langenberg
Senator Gloria Lawlah
Senator Christopher J. McCabe
Mr. William T. Middleton
Ms. Elizabeth K. Moyer
Senator Robert R. Neall
Ms. Carolyn Y. Perkins
Delegate Howard P. Rawlings
Mr. Walter Sondheim, Jr.
Dr. G. William Troxler
Mr. John F. Wagoner

Successful Schools Study -- Description of the Recalculation of a Base Cost and Analysis of the Results

Dr. Thornton began the meeting by asking for review and approval of the Commission's agenda. After the Commission approved the agenda, Dr. Thornton asked Mark Collins, Policy Analyst, Department of Legislative Services (DLS) and John Rohrer, Coordinator, Fiscal & Policy Analysis, DLS to discuss the adjustments that were made to the Successful Schools study conducted by Augenblick & Myers (A&M) to reach a final base cost figure for the study. Mr. Rohrer reminded the Commission that DLS had reported to the Commission on July 12, 2001, on the completed evaluation of the data and assumptions used for the Professional Judgment study conducted by A&M. At that time, DLS advised the Commission that the evaluation of the data and assumptions used for the Successful Schools study was still underway. Mr. Rohrer stated that the evaluation of the Successful Schools study was now complete. Mr. Collins then outlined adjustments that DLS had made to enrollment counts and to the methodology used to allocate local fixed costs and teachers' retirement costs. These modifications are discussed in a document entitled "Successful Schools Study: Description of the Recalculation of a Base Cost and Analysis of Results." The final base cost per pupil resulting from the Successful Schools study is $5,969 ($262 more than the $5,707 calculated by A&M prior to the adjustments made by DLS). This figure can be compared to the $6,612 base cost per pupil derived from the Professional Judgement study. Mr. Anderson asked whether the base cost includes capital costs. Dr. Augenblick answered no and explained that the base cost is a measure of operational costs.

State by State Comparison of Funding for Students with Special Needs

Dr. Thornton asked Dr. John Augenblick, Partner, A&M and Justin Silverstein, Associate, A&M, to brief the Commission on how other states deal with funding for students with special needs. Dr. Augenblick began by stating that A&M had conducted research at the request of the Commission for the purpose of determining the extent to which other states use "per pupil weights" to adjust funding for students with special needs and to compare the weights used in other states to the weights that were derived for Maryland under the A&M Professional Judgment study. Mr. Silverstein presented a document entitled "Comparison of Base Cost Figures and Actual or Implied Pupil Weights for Special Education, At-Risk, and LEP Pupils Across the States."

Mr. Silverstein addressed the following categories of students separately: special education students; students with limited English proficiency; and at-risk students. For each of these categories, he summarized how other states fund services for these types of students and then compared the per pupil weights used by other states to those derived under the A&M Professional Judgment study. He stated that, in comparison to other states, the 1.17 weight for special education students derived from the A&M Professional Judgment study was high. As an example, he noted that the state with the highest single weight for special education students -- i.e., Louisiana, with a weight of 1.5 -- applied this weight to a base cost that is more than $2,500 lower than the base cost derived from the A&M Professional Judgment study.

Mr. Silverstein stated that, in comparison to other states, the 1.39 weight for at-risk students derived from the A&M Professional Judgment study is extraordinarily high. Even the alternative weight of 0.9 suggested by A&M in its report is very high compared to other states. He noted that a third approach was discussed briefly in the A&M report. This approach would use a concentration factor that would provide more money per at-risk student to districts with high concentration of at-risk students. Mr. Silverstein stated that one way to design this factor is to create an equation so that at a very high concentration of at-risk pupils, the weight would be 1.39, while at a lower concentrations, the weight would be lower. Mr. Silverstein stated that, in comparison to other states, the 1.0 weight for students with limited English proficiency that was used by A&M for the purpose of calculating adequate funding in the adequacy studies is higher than the weights being used in other states for LEP students. A&M used the 1.0 weight for the purpose of calculating adequate funding because A&M believes other states would like to use this weight. However, Mr. Silverstein noted that the combination of a 1.0 weight and the relatively high base cost figure derived from the A&M adequacy studies will produce per LEP pupil costs that are far higher than the amounts provided for LEP students in other states.

Mr. Sondheim and Senator Hoffman questioned the relevance of comparing the base cost and per pupil weights used in other states to those that have been derived from the A&M adequacy studies for Maryland. They stated that each state's school finance system is dependent on many different variables and that it is impossible to compare data from other states in a meaningful way. Dr. Augenblick stated that reviewing data from other states is meaningful in two ways. First, it shows that each state does things differently (i.e., has different base costs and per pupil weights) and that there isn't one right way of doing things. Second, it shows that, in general, the base costs and per pupil weights developed by A&M for Maryland using the two adequacy studies are high when compared to the base costs and per pupil weights used in other states. He also stated that he believes weighting is an appropriate method to use in distributing funding for special needs students. However, the Commission must determine the appropriateness of particular weights to be used in Maryland's school finance system.

Senator Hoffman asked whether it was possible that other states simply "backed-in" to their base costs and per pupil weights for special needs students. Dr. Augenblick answered yes, that it was possible that these figures simply reflect available funding, without any direct linkage to the actual cost of providing services. However, he stated that he believes the per pupil weights for special education students in other states are based on each state's determination of the cost of providing these services. With regard to per pupil weights for LEP and at-risk students, he thinks that the differences reflect a desire on the part of states to provide increased funding for these types of students but also a lack of certainty as to the appropriate level of funding.

Tina Bjarekull, Deputy Superintendent, Maryland State Department of Education (MSDE) presented a document entitled "Funding for Students with Special Needs: Overlap Analysis." Ms. Bjarekull explained that MSDE had reviewed data relating to special education students, LEP students, and students who are eligible for free or reduced price meals to determine whether there is any "overlap" in these populations (e.g., a special education student who is also eligible for free or reduced price meals). MSDE's analysis of this data indicates that there is significant overlap between these three categories of students. For example, the data indicates that 21% of students who are eligible for free and reduced price meals are also special education students, LEP students, or both. Ms. Bjarekull suggested that MSDE's analysis could be used to adjust the 1.39 weight for at-risk students developed in the A&M Professional Judgment study. More specifically, she stated that almost all of the overlap among these three categories of students could be eliminated by reducing the at-risk weight to 1.10 (79% x 1.39 =1.10). After discussing this idea, the Commission concluded that a weight of 1.10 for at-risk students should be used in future simulations of possible changes to Maryland's school finance system.

Cost Adjustments for Education

Ms. Bjarekull and Mr. Rohrer then presented a document entitled "Cost Adjustments for Education." Ms. Bjarekull explained that adjustments are often proposed for education funding to reflect differences between jurisdictions in the cost of education. While differences in the cost of education between jurisdictions may be due to factors over which local education authorities have some control, the purpose of cost adjustments is to correct for differences due to factors over which local authorities do not have control. She stated that the Commission should consider four major questions in determining whether to include a cost adjustment in Maryland's school finance formula. For what sources of differences should the adjustment compensate? How should the adjustment be calculated and applied? How often should the adjustment factor be updated? How much does it cost to calculate and update the adjustment (in time, resources, and funds)?

Ms. Bjarekull stated that cost adjustment factors can represent changes in costs over time (e.g, inflation), cost differences between jurisdictions, or both. The differences in education costs between jurisdictions can be looked at in two distinct ways: (1) differences due to a number of factors -- both tangible (e.g., cost of living) and intangible (e.g., weather, proximity to or distance from metropolitan area or cultural activities, and crime rate); and (2) differences due solely to cost of living. The Teacher Cost Index (TCI) and Geographic Cost of Education Index (GCEI) developed by the National Center for Education Statistics reflect the former methodology. These are both "hedonic" indices that reflect differences in intangible factors outside the control of local educational authorities. The Cost of Living Index developed for the Department of Business and Economic Development in 1998 reflects the latter methodology. This index uses expenditures to measure the differences in cost-of-living between local jurisdictions in Maryland and the metropolitan areas of other states. Ms. Bjarekull and Mr. Rohrer explained that, for a variety of reasons, none of these indices would be appropriate for use in Maryland.

Senator Hoffman, Delegate Cryor, Mr. Anderson, Dr. Grasmick, Delegate Rawlings, and Dr. Thornton discussed the possibility of developing a new cost adjustment index for Maryland based on both tangible and intangible factors outside the control of local authorities. After discussing the the difficulties that would be involved in this task, including the need to allow sufficient time and funding for the development of this kind of index, Dr. Thornton asked staff to prepare a recommendation regarding the type of index that should be used in Maryland. He also asked staff to advise the Commission as to how much it would cost to develop the index. Some Commission members expressed concern about the cost of developing a new index. Dr. Grasmick noted that this kind of index would be valuable to various state agencies. She suggested that MSDE might be able to cover some part of the costs but that it would be helpful if other agencies contributed as well. Senator Hoffman noted that it might be possible to get grants from private entities for this purpose.

Alternative Approaches to Enhancing Maryland's School Finance System -- Simulations

Ms. Bjarekull discussed the methodology that was used to develop alternative approaches to enhancing Maryland's school finance system. Ms. Bjarekull began by reminding the Commission that Dr. Augenblick had outlined six alternative models for enhancing Maryland's school finance system at the Commission's July 12 meeting. At that meeting, the Commission had asked staff to calculate the cost of each model using the recommendations regarding base costs and per pupil weights set forth in the A&M report on the results of the Professional Judgement and Successful Schools studies. In response, staff had prepared materials that describe each model, summarize the cost implications for the State and local jurisdictions, provide county-by-county distributions using the results of the Successful Schools study, and assess the impact of each model. However, Ms. Bjarekull stated that certain assumptions had to be made in order to develop each model. She stated that these assumptions as well as numerous variables contained in each model provide opportunities for further refinement. Therefore, it is important to understand the methodology that was used to develop the models. This methodology is outlined in a document entitled "Alternative Approaches to Enhancing Maryland's School Finance System: Basic Methodology".

Ms. Bjarekull also made reference to three one-page handouts. The first handout ranked the 24 local jurisdictions in Maryland based on local wealth. The second handout ranked the 24 local jurisdictions in Maryland based on the number of special needs students in each jurisdiction. She stated that these documents can be used to help understand how each of the models relate to local wealth and the number of special needs students in each jurisdiction. The third handout included three pie charts that show current education funding characteristics. This handout shows the percentage of State aid that is currently targeted or wealth equalized. It also shows the current federal, State, and local shares of education funding. Ms. Bjarekull stated that this handout can be used to compare the current characteristics of education funding to the characteristics of funding that would be provided under each of the models.

Dr. Langenburg asked how local wealth is measured. Mr. Rohrer stated that the measurement of local wealth is based on each county's property assessable tax base and net taxable income. Dr. Grasmick stated that a county's wealth does not necessarily reflect how much it spends on education services. She noted that some wealthy counties spend proportionately less on education than other counties. Mr. Rohrer made some introductory remarks about the simulations for each of the six models. He reiterated that each of the models include variables that can be adjusted. The goal in preparing the simulations was to provide a starting point for the Commission to start eliminating some models from consideration and begin focusing on models that deserve more attention. He stated that once the Commission selects a framework to guide the discussion about possible changes to Maryland's school finance system, it can focus on specific variables in the models.

Steve Brooks, Chief, Budget Division, MSDE then presented each of the six models. These models are outlined in a document entitled "Alternative Approaches to Enhancing Maryland's School Finance System: Simulations." Senator McCabe, Delegate Howard, Senator Hoffman, Delegate Rawlings, and Ms. Perkins discussed various aspects of each of the models, including the extent to which each model reflects a county's local wealth and the number of students with special needs in each county, the meaning of the term "implied local contribution", the State and local share of education funding, and the possibility of phasing in changes over a five year period. Senator Hoffman asked that future simulations include a comparison of current State and local shares to the State and local shares that would be achieved under the different models. Ms. Perkins noted that the models use a weight of 1.39 as the maximum per pupil weight for at-risk students. She questioned whether the weight should be higher in jurisdictions where there is a concentration of at-risk students. Ms. Bjarekull acknowledged that the 1.39 weight had been derived from prototype schools whose enrollment of at-risk students was limited to the State average and that it could be argued that the weight should be higher in jurisdictions with a higher concentration of at-risk students.

Discussion of Preferred Approaches to Enhancing Maryland's School Finance System

Dr. Thornton asked the Commission to discuss whether some of the models should be eliminated from further consideration. Senator Hoffman requested that Models 1 and 2 be eliminated. The Commission agreed. Dr. Grasmick requested that Model 3 be eliminated. The Commission agreed. Delegate Carlson requested that Model 4 be eliminated. The Commission agreed. Senator Hoffman requested that the Commission use Models 5 and 6 as the focus of future simulations. She also asked staff incorporate an estimate of the impact of adjustments for local effort and cost of living in future simulations. The Commission agreed with both of Senator Hoffman's requests. Delegate Rawlings and Senator Hoffman discussed the issue of whether it was possible to include a cost of living adjustment in future simulations -- in light of the fact that the Commission has already decided that Maryland does not yet have an appropriate index for such an adjustment. The Commission concluded that future simulations could include an "estimate" of the affect of a cost of living adjustment. Delegate Rawlings, Senator Hoffman, Mr. Anderson, and Ms. Gordon expressed concern about the cost of "implied local contributions" in future simulations. Mr. Middleton and Senator Lawlah stated that the State and local share of education funding can always be adjusted after reviewing future simulations. Mr. Sondheim asked staff to present future simulations in a manner that makes it easy to compare key issues for each model.

Discussion Regarding Regional Public Hearings to be Held on September 10, 2001.

Dr. Thornton stated that the Speaker had requested that a fifth public hearing be held in Cumberland on September 10. The Commission agreed to add the fifth hearing. Dr. Grasmick asked staff to prepare uniform ground rules for the five public hearings that could be used by each of the five designated chairs. Dr. Thornton directed staff to prepare proposed procedures for the public hearings to be reviewed by the Commission at its meeting on September 6. Dr. Thornton asked whether the Commission would like to make any changes to the questions that had been prepared by staff to guide the testimony at the public hearings. Ms. Perkins stated that individuals should be allowed to address issues relating to the Commission's interim recommendations at the hearings. After discussing this issue, the Commission agreed to add language to the list of questions that provides information about how individuals can obtain copies of the Commission's interim report. With this modification, the Commission approved the questions. Dr. Thornton stated that the agenda for the meeting of the Commission on September 6 would include a discussion of issues relating to gifted and talented students. The meeting was adjourned at approximately 4:00 p.m.